Real Estate Tax Regime in Cyprus (2025–2026)

Real Estate Tax Regime in Cyprus (2025–2026): What Buyers, Investors & Institutions Need to Know

Cyprus continues to offer an attractive and competitive real-estate environment, with favourable tax rules for individuals, companies, investors, and—under new legislation—certain educational institutions. Below is an overview of the current tax framework, including VAT rules, transfer fees, stamp duty, and the newly introduced 5% VAT rate for eligible educational projects.

Standard VAT – 19%

The standard VAT rate of 19% applies to:

• The first sale of new residential or commercial properties.
• Purchases of new properties by companies, since companies are not eligible for the reduced VAT scheme reserved for individuals.

Reduced 5% VAT for Individuals (Main Residence Scheme)

A reduced VAT rate of 5% applies to natural persons who purchase a property to use as their primary residence, subject to specific criteria, including:

• Buyer must be an individual (not a company).
• Property must be used as the permanent main home.
• The 5% rate generally applies to up to 130 m² of the property’s eligible area (with limits on total area/value).
• Use for at least 10 years as permanent main residence, otherwise VAT adjustments apply.

If 5% VAT is applied:

• No transfer fees are payable.

NEW: 5% VAT for Educational Institutions (December 2025 Decree)

On 5 December 2025, the Council of Ministers approved a measure reducing VAT from 19% to 5% on the construction and renovation of buildings to be used by eligible educational institutions (Decree Κ.Δ.Π. 364/2025).

Eligible institutions include:

• Public schools (all levels)
• Private schools registered under the Private Schools and Tutorial Centres Law of 1971
• Private tertiary institutions under the Tertiary Education Institutions Law of 1996
• Organisations or foundations recognised by the Registrar that are directly linked to VAT-exempt educational services.

Tutorial centres are explicitly excluded.

Important notes:

• The 5% rate applies only to construction and renovation services, not to the purchase of completed properties or long-term leases.
• For institutions performing both exempt education and VAT-taxable activities (e.g. bookshops, cafeterias, commercial licensing), it is not yet clear whether costs should be apportioned between 5% and 19%.
• Transitional provisions may affect contracts signed before the decree was introduced.
• The Tax Department is expected to issue further clarifications.

This measure provides substantial VAT relief for eligible educational institutions, particularly where construction and renovation represent significant capital costs.

Transfer Fees

Charge of Transfer Fees only when VAT is not applied (i.e., for resale properties).

Rates:

• 3% on the first €85,000
• 5% on €85,001–€170,000
• 8% on the amount above €170,000

Notes:

• If VAT was paid, no transfer fees are due.
• In certain cases, a 50% reduction may apply (e.g. joint transfers).

Stamp Duty

Stamp duty has been abolished from tax year 2026 and onwards.

For any agreement entered before 1 January 2026, stamp duty is payable when signing the sale agreement. Typical rates:

• 0.15% up to €170,000
• 0.20% on amounts above €170,000
• Maximum charge capped by law

Applies regardless of whether the buyer is an individual or a company.

Ongoing Taxes (Annual Costs)

Cyprus has no annual immovable property tax since 2017.
However, owners must pay:

• Municipal taxes
• Waste collection fees
• Sewerage board fees

These vary by municipality.

Buying Through a Company (Entity Ownership)

When you purchase or hold real estate through a company (or other legal entity), the tax and regulatory landscape differs compared to individual ownership. Key points to keep in mind:

• VAT & Transfer Fees:
  • For new properties, companies are subject to the standard VAT rate (19%). Entities are not eligible for the reduced 5% VAT scheme reserved for individuals buying a main residence.
  • For resale properties, the classic transfer fees regime applies (unless other exemptions apply).
• Company vs. Share Transfer Route:
  • Rather than transferring the property title, investors may opt to transfer shares in the company that owns the real estate. This often results in no VAT or transfer fees, because regulations treat the share sale differently from property title transfers.
  • However, indirect transfers (through share sales) trigger a 0.40% levy on the transfer of real estate share ownership — calculated on the current valuation of the property underlying the shares.
  • For companies that trade in real estate (i.e. property development or property business), future sales or transfers may trigger corporate tax (12.5%), rather than capital‐gains tax.

Implications of Article 11B (Construction / Maintenance VAT Reverse-Charge)

Since August 2020, an amendment to the Cyprus VAT law clarified and expanded the scope of Article 11B: when a business / legal person (e.g. a company) commissions services (or services plus goods) for construction, renovation, repair, maintenance or demolition of a building, the customer (i.e. the company) must account for VAT via the reverse-charge mechanism — even if the supplier is not a VAT-registered taxable person.

What this means for property-owning companies:

• If your company undertakes renovation or maintenance of a building it owns, or commissions construction services (e.g. refurbishment, structural works, repairs), it cannot rely simply on the contractor to charge VAT.
• The company itself must self-account for VAT under Article 11B. In practice, this means the company must declare and pay the VAT for the value of the services — similar to what happens under an intra-community purchase for goods.
• This rule helps prevent VAT avoidance and ensures that VAT is captured on construction and renovation services, even when the supplier lacks formal VAT registration.

Therefore, companies using real estate in Cyprus — for rental, commercial use, or as investment properties — must be aware of Article 11B obligations whenever they perform works on the property.

Key Takeaways

• Individuals buying their main residence may benefit from 5% VAT (under strict conditions).
• Companies cannot use the 5% reduced VAT scheme.
• Educational institutions (as of Dec 2025) have a new 5% VAT framework for construction and renovation.
• Resale properties are VAT-exempt but subject to transfer fees.
• No annual immovable property tax exists, but municipal fees apply.

Proper tax planning is essential, especially for investment structures or mixed-use buildings.